Idaho v. Bunker Hill Co.

The court rules on motions for summary judgment brought by insurance companies regarding their duty to defend and indemnify their insured in an action brought by the State of Idaho under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and state law. The court initially notes that an insurer has an immediate duty to defend if a claim presents an arguable potential for liability covered by the policy. The insurer may simultaneously seek declaratory relief if it believes the claim is not covered by the policy but must continue to defend until a determination of noncoverage is made.

The court first holds that an insurer's argument that Idaho's CERCLA claim does not create potential liability for the insureds' preenactment releases and damages does not relieve the insurer of its duty to defend. Under the policy, the insurer must defend against even groundless allegations. The court holds that questions of fact remain as to this insurer's claim that the policy's pollution exclusion clause excludes coverage for Idaho's claims. The court next holds that, under the clear language of the policy, coverage is provided only if actual property damage occurs during the policy period, not just the event giving rise to the damage. The court therefore declines to apply any of the trigger of coverage theories. The court holds that this insurer has no duty to indemnify since the policy expired in 1978 and the court has previously held that Idaho may not recover under its CERCLA and state law claims for damages occurring when the policy was in effect. The court holds that the insurer's duty to defend lapses on the date of this declaration of noncoverage. The court next holds that a second insurance company owes no duty to indemnify because its policies lapsed prior to the date after which the court has held that Idaho may recover. The court holds, however, that this insurer has a duty to defend since Idaho's amended complaint seeks recovery for damages that occured during the policy's coverage and creates a potential for liability.

Turning to the defenses raised by a third insurer, the court first rejects the claim that a defendant was not a named insured under the policy. The court next holds that the policy's definition of an "occurrence" as an accident that results in damage that is neither "expected nor intended" requires that the event or accident, not the resulting harm, be unexpected or unintended for there to be an occurrence. Thus, a sudden and accidental release of pollutants constitutes an occurrence. The court next holds that summary judgment based on the insurer's argument that its policy covering operations during shutdown does not cover production releases is inappropriate because factual questions remain as to whether releases occurred during the policy's coverage. Summary judgment is also inappropriate based on the insurer's argument that Idaho's claims deal with damages that arise from erosion, which are excluded from the policy's coverage since factual questions remain concerning the extent of the damage claimed by the state. The court next holds that the insureds' claims against this insurance company under Idaho's unfair trade practices act should be dismissed. Although defendants have sufficiently alleged the existence of a business practice, there is no private right of action under the act. The court holds that the insurer is not entitled to summary judgment for its claim that its insureds breached the conditions precedent to actions against the insurer of written notice of occurrences and demand on the insurer's authorized representative of any claims. Factual questions as to whether the insureds have substantially complied with these conditions remain. The court holds that the policy's no-action clause does not prohibit the insured from suing its insurer where the insurer has failed to satisfy its duty to defend. The court next holds that the insureds' tort claim for bad faith against the insurer must be dismissed, since it is more properly addressed in the insureds' claim for punitive damages, not as a separate cause of action. The court concludes that this insurance company has a duty to defend and denies its motion for summary judgment on whether it has a duty to indemnify.

The court holds that under the "cooperation of assured" clause in the policies issued by a fourth insurance company, the duty to defend arises upon the filing of a complaint, not when the insurer rejects the claim. The court also holds that this insurer has a duty to defend a successor to the rights of the original insured. The court holds that a fifth insurance company owes neither a duty to indemnify nor defend its insured. Since its policy lapsed before the effective date of the insured's merger with the Idaho mining company, there is no possibility of liability under the policy. The court refuses to grant summary judgment for a sixth insurance company, holding that its policy covering the individual member of a joint venture covers the individual venturer for its activities in the venture. Finally, the court refuses to grant summary judgment for a seventh insurer, since factual issues remain as to its claim that the insured failed to comply with the policy's notification conditions precedent and individual joint venturers are covered under the policy for their activities in the venture.

[Earlier decisions in this case are published at 16 ELR 20715 and 20879.]